Lease buyout negotiation tips?

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pomidoro
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Lease buyout negotiation tips?

Post by pomidoro »

My DW's VW Passat lease is coming to the end and the dealer already contacted us with few options for the new lease (awful ones) but we didn't like any of it. The residual value is around $12k and we can easily squeeze 40k more miles from it (I hope for more but have few concerns about TSI engine).
However it looks like that dealer won't be able to sell it for $12k via the auction (if we return the car) so I wonder how to properly negotiate the buyout.
Any success stories / tips / thoughts are appreciated
obgraham
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Re: Lease buyout negotiation tips?

Post by obgraham »

I've gone through this three times with end-of-lease discussion, and never yet been able to convince the lessor or a dealer to take anything different than the original lease specifications.

The dealers don't care, because it's the leasing company that owns the car.
nhdean
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Re: Lease buyout negotiation tips?

Post by nhdean »

Unfortunately there is no negotiating a lease buyout. The dealer has nothing to do with it. They do not own the car, the finance company does. Buying out a lease in most cases costs more than if you originally just bought the car out right. In most cases a leased vehicles value is less than buyout value.
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pomidoro
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Re: Lease buyout negotiation tips?

Post by pomidoro »

nhdean wrote: Sat May 19, 2018 6:49 pm Unfortunately there is no negotiating a lease buyout. The dealer has nothing to do with it. They do not own the car, the finance company does. Buying out a lease in most cases costs more than if you originally just bought the car out right. In most cases a leased vehicles value is less than buyout value.
Finance company doesn't need a car and they'll be able to get much less than $12k for via the auction.
Yeah, we're going to buy the next one using cash
nhdean
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Re: Lease buyout negotiation tips?

Post by nhdean »

It is not a matter of needing a car or not. All lease cars go to auction.
pshonore
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Re: Lease buyout negotiation tips?

Post by pshonore »

And a few years back, some of the lease finance companies used to "insure" the buyout with a financial instrument available through specialty insurance companies who love to gamble on anything. I don't know if that's common practice anymore.
nhdean
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Re: Lease buyout negotiation tips?

Post by nhdean »

I have no idea. never heard of that
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dm200
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Re: Lease buyout negotiation tips?

Post by dm200 »

Based on all the facts and details (such as mileage, condition) - what purchase price have they given you?
JuniorBH
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Re: Lease buyout negotiation tips?

Post by JuniorBH »

I'd be surprised if the dealer will negotiate.

If the residual is higher than the dealer could sell it for at auction, how does it compare to market value for a similar car?
Quickfoot
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Re: Lease buyout negotiation tips?

Post by Quickfoot »

There may be value in purchasing a car you leased because you know its maintenance history but don't expect the leasing company or the dealer to be able to offer you a lower buy out, they can't / wont.

As others mentioned the dealer wont negotiate because they are unable to, they don't own the lease. When a dealer "buys back" a leased car with a higher residual than actual value it's the same thing as when you trade in a car you owe more than it is worth, the difference gets rolled into your new loan or they give you a discount and it comes out of their pocket. Negative equity is negative equity and has to be compensated for.

If you don't want the car pay the lease termination fee (mine have been around $400) and return the car. Often if you are buying or leasing another car of the same brand they'll waive the lease termination fee and sometimes even over mileage fees (Ford gave me a $1,000 credit towards extra wear and tear and miles).
strafe
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Re: Lease buyout negotiation tips?

Post by strafe »

pomidoro wrote: Sat May 19, 2018 5:50 pm My DW's VW Passat lease is coming to the end and the dealer already contacted us with few options for the new lease (awful ones) but we didn't like any of it. The residual value is around $12k and we can easily squeeze 40k more miles from it (I hope for more but have few concerns about TSI engine).
However it looks like that dealer won't be able to sell it for $12k via the auction (if we return the car) so I wonder how to properly negotiate the buyout.
Any success stories / tips / thoughts are appreciated
Congratulations! I’ll be the first to point out that you came out ahead financially by leasing. The car’s actual depreciation exceeded the monthly depreciation charge (lease payment minus interest).

There’s a symmetry here. To the extent you are overpaying with $12k buy out, you underpaid by the same amount over the course of the lease. It all cancels out.

Personally, I would just hand in the keys.
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NavyIC3
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Re: Lease buyout negotiation tips?

Post by NavyIC3 »

Does anyone know if the dealer gets paid from the leasing company when a leased car is returned? I know that the disposition fee is waived under certain conditions. I would think that the dealership gets some form of compensation for handling the return. I'm wondering if this can be used as leverage on a new lease.
Jack FFR1846
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Re: Lease buyout negotiation tips?

Post by Jack FFR1846 »

NavyIC3 wrote: Tue May 22, 2018 8:06 am Does anyone know if the dealer gets paid from the leasing company when a leased car is returned? I know that the disposition fee is waived under certain conditions. I would think that the dealership gets some form of compensation for handling the return. I'm wondering if this can be used as leverage on a new lease.
The dealer is compensated. Otherwise, why would a dealer take in a $10k car and give the leasing company the $12k residual value? Jacking up the residual value is one of the ways that car companies subsidize leases. Some years ago, Cadillac puffed up their chest and stated that the residual value would be really high.......just because they said so. Actual values of the cars at lease end were barely 50% of the stated residual. Nobody bought out their lease!

Turn in the keys. Get something else.
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pennylane
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Re: Lease buyout negotiation tips?

Post by pennylane »

You can't negotiate a residual price at the end of the lease.

Manufacturer can wave the the dispo fee at the end if you purchase another vehicle from them

Dealer does not get paid if they take your car in.. They just have first dibs of buying it from the bank if its clean.. if its not, the bank sends a truck and it picks up the vehicle to head to auction.

buying a new vehicle vs leasing a new vehicle isnt a better bang for the buck...

Your lease number is based on the estimated cost of the vehicle at the end.. for example a 50k vehicle with a 50% residual will depreciate 25k over 3 years.. so they take the 25k and divide it by 36 + taxes, interest (money factor) and fees and that is your monthly payment.

If you purchase the vehicle, at the end of 3 years its worth 25k... Its the same thing except you have the option of getting out of the car in 3 years where a finance you have to try selling for 25k or more (most of the time you can't)

I don't purchase new vehicles but if I did, I would lease...

Please don't be that guy coming in thinking you have an upper hand and trying to negotiate a car thats not theirs.. They will laugh you out the front door.

- I am a former Finance Manager at a Luxury dealership
inbox788
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Re: Lease buyout negotiation tips?

Post by inbox788 »

nhdean wrote: Sat May 19, 2018 7:10 pm It is not a matter of needing a car or not. All lease cars go to auction.
Is that a rule or guideline? Coming from the leasing company, it's a good policy, so you can validate your end of lease residual values. By forcing all the returned cars to get a market adjustment, you get real figures instead of further skewed results. There is already the effect that some owners keep their cars based on their perception or knowledge about the specific car and used car marketplace. The leasing company would rather lose a few hundred dollars on your car and make the appropriate adjustments in all their future leases than get bad figures that cost them to make compounded mistakes.

OP, it wouldn't hurt to let the dealer know you were interested in the car when it goes on sale. After you turn in the car, they may find a way to work something out.
kjvmartin
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Re: Lease buyout negotiation tips?

Post by kjvmartin »

inbox788 wrote: Tue May 22, 2018 2:13 pm
nhdean wrote: Sat May 19, 2018 7:10 pm It is not a matter of needing a car or not. All lease cars go to auction.
Is that a rule or guideline? Coming from the leasing company, it's a good policy, so you can validate your end of lease residual values. By forcing all the returned cars to get a market adjustment, you get real figures instead of further skewed results. There is already the effect that some owners keep their cars based on their perception or knowledge about the specific car and used car marketplace. The leasing company would rather lose a few hundred dollars on your car and make the appropriate adjustments in all their future leases than get bad figures that cost them to make compounded mistakes.

OP, it wouldn't hurt to let the dealer know you were interested in the car when it goes on sale. After you turn in the car, they may find a way to work something out.
The residual value purchase price after the lease is up is always fixed. This is not negotiable.

When our lease is up, we need to go from 2 rows to 3. We'll be negotiating a best purchase price around town and then turning our lease in after we've decided on our next vehicle.
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wabbajack
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Re: Lease buyout negotiation tips?

Post by wabbajack »

nhdean wrote: Sat May 19, 2018 7:10 pm It is not a matter of needing a car or not. All lease cars go to auction.
pennylane wrote: Tue May 22, 2018 8:17 am I don't purchase new vehicles but if I did, I would lease...

Please don't be that guy coming in thinking you have an upper hand and trying to negotiate a car thats not theirs.. They will laugh you out the front door.

- I am a former Finance Manager at a Luxury dealership
I wish I knew this before I bought my current car. Learned something new today. I had leased before and thought I ended up behind. I have bought out the vehicle at the end of lease and it was not a good deal. I would vote in favor of turning in the keys.
inbox788
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Re: Lease buyout negotiation tips?

Post by inbox788 »

kjvmartin wrote: Tue May 22, 2018 2:46 pmThe residual value purchase price after the lease is up is always fixed. This is not negotiable.

When our lease is up, we need to go from 2 rows to 3. We'll be negotiating a best purchase price around town and then turning our lease in after we've decided on our next vehicle.
The residual price is if you want first refusal. After you return the car to the dealer, everything is negotiable. I'm guessing the accepting dealer has next refusal, and can buy the car for that residual price (maybe a bit less), but wouldn't buy it if the car was worth a lot less. I don't see why the dealer couldn't send the car on to auction and buy it there at the much lower wholesale market price.

And never say never. With the Nissan Leaf, they were offering adjustments and incentives even before you turned in the car.

http://www.mynissanleaf.com/viewtopic.php?f=23&t=16629

I'm sure Nissan Finance knew they were overpricing the residuals, but had to move the cars, so hopefully they put away enough reserves to cover the shortfall now (delayed discount).

Much of the time, if the leasing company did their job right, the residual value is very close to the market value of the car, so the variance is mostly dealer profits and fees.
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pomidoro
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Re: Lease buyout negotiation tips?

Post by pomidoro »

I'm really surprised by the number of

Turn in the keys. Get something else.
suggestions.
IMHO I can spend $12k now and get 40-50k more miles or spend $22k + for a new vehicle. Why to overpay $10k if I can postpone it for at least 4 years?
pennylane
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Re: Lease buyout negotiation tips?

Post by pennylane »

pomidoro wrote: Wed May 23, 2018 5:46 am I'm really surprised by the number of

Turn in the keys. Get something else.
suggestions.
IMHO I can spend $12k now and get 40-50k more miles or spend $22k + for a new vehicle. Why to overpay $10k if I can postpone it for at least 4 years?
Go buy a similar used vehicle to the one you're turning in for 12k and you'll get 40-50k more miles.

What you just said is not an apples to apples comparison.

spend 22k = new car (40-50k miles)
spend 12k = used car (40-50k miles)

see? One is used and the other is new. The used is better value, this is why I don't purchase new cars. I prefer 5-6 year old cars. Usually can get them for 20-35% of the MSRP and they are about 25% into their lives.
Quickfoot
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Re: Lease buyout negotiation tips?

Post by Quickfoot »

Notion of getting only another 40-50K miles out of a car at 40-50K miles is just antiquated. Most passenger cars are going to hit 200K miles EASY without major problems, the more reliable brands could be closer to 300K. Manufacturing has got incredibly good with tight tolerances. The reason cars come with higher mileage warranties isn't out of the goodness of the hearts of the manufacturers, it's because they know even at 100K miles they are very unlikely to have major claims.

Ford (middle of the pack for reliability) doesn't expect major power train work on passenger cars until after 200K miles.

In today's world people typically don't buy new cars because their old one is worn out, they buy a new one because they get tired of their car well before it is even close to wearing out.
jbmitt
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Re: Lease buyout negotiation tips?

Post by jbmitt »

Our leased car just had spring hail damage. I've never been more excited that I don't own it. It will make turning it in (after being repaired by insurance) a lot easier for me.
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